Canadian Solar "shall pay" $40 million in compensation to LDK

13. December 2012 | Industry & Suppliers, Markets & Trends | By:  Becky Beetz

Canadian Solar may have to pay back compensation to LDK Solar Co. Ltd for the "illegal termination" of two photovoltaic wafer supply agreements made in 2007 and 2008. A Canadian Solar spokesperson said the company is reviewing the decision.

LDK Solar branding

After 2 years, it seems as though LDK Solar has won its arbitration battle against Canadian Solar.

According to LDK Solar, China’s International Economic and Trade Arbitration Commission (CIETAC) has determined that the take or pay wafer supply contracts entered into by Canadian Solar with LDK between 2007 and 2008 are "valid and effective through the duration and at terms and conditions related to quantities and prices set forth therein."

As such, Canadian Solar is expected to pay back RMB 248.9 million (around US$39.8 million; €30.4 million), including RMB 60 million paid as a deposit, RMB 188.9 million in cash to compensate for loss of profitability, and RMB 2 million to cover arbitral fees accrued as a result of the legal proceedings.

A spokesperson for Canadian Solar told pv magazine that the company has received the decision and is reviewing its options.

The two parties entered into two 10 year wafer supply agreements between October 2007 and June 2008. However, Canadian Solar gave notice to terminate the two contracts in April 2010 and then in the July initiated arbitration proceedings to recover the outstanding $8.8 million (exchange rate 2009) in advance payments.

Two months later, in September, LDK Solar then filed an objection for an Arbitration before the CIETAC. The company also filed a  lawsuit to demand compensation from CSI "due to the breach of a take-or-pay supply agreement signed by the two companies and the illegal termination of the agreement."

Commenting on today’s news, Xingxue Tong, president and CEO of LDK Solar stated, "We are pleased to receive this award after entering into this arbitration proceeding more than two years ago … Regretfully, underperforming supply contracts contributed to our lower-than-expected plant utilization ratio."

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